PERMANENT TSB has suspended its 100 per cent mortgages and cut the maximum loan it will offer on investment properties to 80 per cent of the property's value from 90 per cent due to the slowdown in the housing market.
A spokesman for Permanent TSB said the bank had taken the decision to reduce its exposure on new home and investment property loans as part of "a more prudent lending policy in the current environment".
He said the maximum mortgage that the bank would make available to borrowers would be 92 per cent of the value of the property.
He said the bank had entered the 100 per cent mortgage market after its rival, First Active, and had "followed rather than led".
The bank had increased the qualifying criteria for 100 per cent mortgages last year, but was now withdrawing the product fully because "the market has changed" and "the competitive nature" of the banking market had changed.
The bank informed brokers yesterday that it would introduce the changes from March 31st.
Borrowers who apply by the end of the month will have a grace period until the middle of next month to draw down the loans under the old lending rules.
Denis Casey, chief executive of Irish Life & Permanent, said at the group's 2007 results last month that 100 per cent mortgages represented around 4 per cent of its mortgage book, or between 2,000 and 3,000 mortgages. The product had served its customers "very well" and had helped "a very significant number of customers to get on to the property ladder".
He said property prices fell 7.2 per cent last year and would decline by a further 4-5 per cent in 2008, but that falling prices would not affect the ability of customers with 100 per cent mortgages to meet repayments.
"People bought homes, they're living in their homes and they're repaying their mortgages. If you're a homeowner, your home is worth 7 per cent less. It doesn't make a difference to you as long as you can afford to repay the mortgage."
Permanent TSB, Ulster Bank and IIB Homeloans were the first banks to raise interest rates last December, passing on to customers the higher rate of funding due to the credit crisis.
